Most mortgagees will refinance their home loan several times over the period of the loan. In fact, loan experts agree it’s important to reassess your loan every 5 years or so to ensure you are still on the right financial path.
Be careful though, many borrowers make one or more of the following mistakes when looking to refinance:
1 Stick with their current lender for no real reason – Don’t be afraid to look around and change lenders providing the alternative is a better option for your needs. Lenders don’t generally make an effort to keep your business so don’t feel obliged to stick with them.
2 Choose the lowest interest rate – Assuming the lowest rate is the best option is sometimes short-sighted. Be sure to choose the loan that meets all of your requirements e.g. offset account, redraw facility etc. The overall package is what’s most important.
3 Apply with several lenders – a common mistake is applying with a great deal of lenders and brokers to find the best deal. The more you apply, the more often a lender or broker conducts a credit check. More credit checks, more often actually harm your credit history and may lead to rejection or less than ideal interest rates.
4 Don’t read the fine print – a mortgage is a huge financial commitment. Not fully understanding what you are signing up for can come back to bite you later. Check the terms and conditions of the loan carefully, this is your money at stake. And never be afraid to ask for explanations of fees you are being asked to pay.
5 Blindly trusting the inexperienced – lenders that have been in the mortgage market for a short while may not offer the same level of service or ongoing competitive pricing. Lack of flexibility in loan products can also add significantly to the cost of a loan, especially for property investors.